Prohibition's Leftovers: Pennsylvania's Beer Distribution Problem

June 11, 2013

Pennsylvania's beer distribution system, designed to provide a competitive advantage to in-state brewers, is nearly identical to Michigan's wine distribution system that was the subject of the Supreme Court case Granholm v. Heald. Yet in the eight years since the U.S. Supreme Court declared such protectionist schemes unconstitutional, the Pennsylvania legislature has introduced (and subsequently failed to pass) only one bill to bring the state into compliance with the decision. Although the bill complied with Granholm, it left in place the three-tier system that was designed by Prohibitionists of another century to increase costs and make distribution of alcohol more difficult. Lawmakers should resist efforts to revive that approach, says David Scott, an attorney in Philadelphia.

The idea of exempting in-state brewers from the three-tier system is not unique to Pennsylvania or the malt beverage industry.

In Michigan, the state offered a special "winemaker" license that allowed the holder to ship directly to in-state consumers. The permit was only available to Michigan wineries; out-of-state wineries had no option but to utilize the three-tier system.

The Court held that, "State laws violate the Commerce Clause if they mandate 'differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the later. . . . States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.'"

Pennsylvania's beer distribution system is nearly identical to Michigan's wine distribution system. Pennsylvania breweries are permitted to self-distribute their products to retailers in the state, but out-of-state breweries must go through wholesalers.

Pennsylvania General Assembly's Legislative Budget and Finance Committee asserted in a recent report that Pennsylvania is in violation of Granholm and the laws must be changed, stating: "To address the Granholm decision, the PA Liquor Code needs to be amended to eliminate the disparate treatment of in-state and out-of-state manufacturers."

In order to bring Pennsylvania's beer laws into compliance with Granholm, the legislature should eliminate the required use of wholesalers for all brewers, regardless of where they are located or how much beer they produce.

This would allow all brewers to self-distribute and thus have control over their products.